Danaher Thrives on Discipline

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By Jerry Knight
Monday, January 30, 2006

For the chief executive of an $8 billion-a-year business that grows by making acquisitions, Danaher Corp. President H. Lawrence Culp Jr. has an impressive ability to say no.

He said no last September, when District-based Danaher was asked to raise its bid for Leica Geosystems AG, a Swiss maker of surveying instruments.

He did it again last week, refusing to boost Danaher's bid for First Technology PLC, a British firm that manufactures electronic testing equipment and crash-test dummies.

Danaher was bidding against Honeywell International Inc. for First Technology and appeared to have won the auction with a $634 million offer. But last Tuesday, Honeywell raised its bid to $718 million.

Danaher didn't bite.

Following the poker rule to "know when to hold 'em, know when to fold 'em," Culp's dealmakers walked away from the table, refusing to match Honeywell's bid.

While Danaher missed the opportunity to acquire a business that analysts said would have fit nicely into its test-equipment operations, it probably still will make money on the exercise. Danaher had acquired almost 15 million shares of First Tech and could make close to $1 a share by selling them to Honeywell.

Danaher executives did not return phone calls seeking comment on First Technology, but Culp talked about the transaction that didn't happen Thursday during a conference call with analysts after Danaher reported a record 2005 profit of $907.7 million, up from $746 million the year before.

"How do you stay disciplined?" Culp was asked. How do you resist the temptation to put a few million more on the table to get what you want?

"For us, staying disciplined is easy because that's the only way we know how to play the deal game," Culp said. He assured investors that they don't have to worry about the company "doing something that would not create value for Danaher shareholders."

"There are auctions all the time," he said, noting that Danaher won the bidding last year for Leica Microsystems AG-- a maker of microscopes -- but lost in the auction of Leica Geosystems. (Both are siblings of the legendary Leica Camera AG.)

"When we need to play the game, we will be aggressive but we will be disciplined," Culp said.


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